Desperate Tech Entrepreneur Needs Advice

stevirusky

New member
I really need some advice on my current work situation, which is unfortunately a very long story, so I apologize and ask you bear with me. Everyone in my life is either too close to the problem (with the risk of having a special interest), or not knowledgeable enough in this arena to give very credible advice.
I’ve been dealing with an abusive partner/boss in a startup for years, which I have sacrificed a lot to get into, for a very real but distance promise of a big payout, and I think that is slipping away now...

Today:
I work for a tech startup, with one other person, our CEO, who is a serial entrepreneur. Our company is somewhat tight on cash (I estimate our runway at 7 months), and we are really just chasing after a large licensing deals for our technology. After 2 years of chasing 3 customers, one has recently committed and paid significant money in Quality Assurance testing of our tech (novel safety product) and is very close to signing the next phase of the commercialization partnership – production planning. During this phase a large down-payment of royalties would come in and a design licensing and royalties contract would be finalized. The client was hoping to hit market ASAP, targeting March 1, 2018 only two months ago. Just today I found out they will not be moving forward into this next phase until all the testing is complete, which is in 60 days. Some complications in the Quality Assurance testing has shaken their confidence and they want to see it through to the end which takes 60 days, instead of taking our previous results as assurance to move forward. I am confident our tech can pass all tests, and it is just a matter of tweaking some parameters to reach the optimal tradeoffs. When I told the CEO of this 60 day delay in the next phase and our next paycheck from the client, he got very quiet (which is unusual) and he said this is very unfortunate and he has to really think about if this is worth his time, and that maybe I should start looking for a fall back job sooner rather than later. I told him it also isn’t worth my time for much longer, and we need to meet to discuss the reality of the situation soon (implying he needs to compensate me better). He said there isn’t much to discuss, and we have very little money left (he has always hid the money from me). As usual, he acted very frustrated and cut the call.

My CEO:
~60 years old, very experienced in a different industry, having started 6 companies, and taken one public (he netted ~$10M). But all this was completely unrelated industries to our current tech and startup. He made most of his money about ten years ago – and has invested most of it in a nice house. Since then his last few companies have failed and he hasn’t even had a salary in a few years. He has told me personally he is not very liquid and is trying to sell his house and downsize, and lives a very frugal lifestyle (always taking public transit or his beat up 20 year old truck, etc).
His personality is very conservative or old school – aggressive, discriminatory, and unorganized… always talking about “taking care of our own” and “doing what’s right”… which seem to always work out in his best interest above all. He is also extremely volatile, critical, impatient, sensitive – and dishonest. He is always playing an angle, and his story changes daily. He is also very spiteful and is extremely sensitive to criticism and “disrespect”. He is very hypocritical and never takes ownership or blame for anything. But to his credit he is very ambitious and hardworking (though not very efficient). He currently is involved with three companies (two others aside from mine) and he constantly spreads himself too thin with very little organization or planning. Basically he just stumbles through everything, dominating every conversation and expecting to be considered right all the time, because he has all the “experience”. I want to leave politics out of this, but the best way I could describe him is very much like Trump in his behavior and thinking.
The first company, our current company, was really just a whim of his, something he branched out to try well outside his background. For about 3 years now, he really only controls the bank account and gets final say on monetary matters, and he spends an average of 4 hours a week on it, conservatively.
Meanwhile, his second company is his main time commitment, which is actually in his industry, and he is CTO, buying into it 3 years ago. This company was founded by another guy who is the CEO 8 years ago, and they have finally come to the cusp of securing Series A Venture Capital funding, after getting some serious traction in sales in 2017 (>400k). The due diligence step will likely be finalized within a month, and then they will get the funds and hit the ground running. This has been a saving grace for my CEO because he has spent 3 years without pay, managing 5 engineers, and essentially running the company because the CEO/founder is very inexperienced and in most people’s opinion unfit to be a CEO. If they use this Series A funding properly, I am confident they would be >$100M company in
 
@stevirusky My apologies if my comment is inaccurate as I took 30 seconds to skim through that and a recurring theme is your ceo is being a dick.

If it goes against your values why work with someone that conflicts with yours?

Imo time to find a strategic out and I would say pursue legal advice to where you stand.

Good luck
 
@goodfruit Basically yea.

Can't afford legal but I do need to find a way out or a big change... but just leaving would mean throwing away so much, I hope to find a way to make this investment pay out.
 
@stevirusky It sounds to me like he may be about to back out. Push him to do that, it is already in his mind..tell him that for whatever reason you know you should walk away, but you've invested so much, etc .. if he ends up in breach of his operating agreement, if you even have that...Or whatever licensing agreement documents are in place, you can realistically buy his shares from him via some third party mediation.

Simply stealing the patent and business from him, honestly that probably won't work. It sounds like for better or worse he is more juiced in than you and you won't find many allies. Academia won't be a lot of help period in all likelihood. You need to talk to a real attorney and see what your options realistically are.

As of now, you seem to have nothing except the fact that you believe yourself to be essential. That isn't a lot. Nothing in writing at this phase is really pretty bad. Is ownership of the company not a matter of public record? Funneling money to other companies, etc... I doubt you could pin him with any of that. Even if you do, that's not great for your brand and any potential deals in the pipeline.

Figure a way to wrest control, legally, or move on. Sounds like at best you are both exhausted and that maybe the product isn't even viable, you may not be seeing it clearly. You probably are almost out of money. 160k with no revenues doesn't go that far.

I would just make him an offer if you really believe in it, but maybe you shouldn't believe in it so blindly (probably not the right word, maybe optimistically)...But you're young, so you have that going, you can make mistakes here.

Attorney is your real bet here no matter what. All paths start with that, honestly. There is a lot of speculation in your post and not a lot of hard facts so you need a professional to dig into it. If it costs you a couple grand to save years and tens of thousands, that's smart money spent.

I do wish you the best man. 60 days isn't that long to wait something out, but a lot isn't adding up here and I don't know what anybody else can tell you. I like to think that many of us are seasoned guys in this sub...You probably won't get a lot of advice that engenders the viewpoint of, fuck him it's your company just take it, you deserve it. LOTS of successful people are childish, surprisingly so.

Sort of feels weird to me that some successful businessman would wait around a university to get good deals on patents in an unrelated industry, I don't get that. Especially with the cost if capital inherent to the bull market of the last decade or so. Idk, that's my $.02
 
@aussiealways Thanks for the detailed feedback.

I agree that he is close, but that's always the case... 60 days isn't long to wait, we have the cashflow, he just gets so volatile. But to me this 60 days is a window in which I could have a marginally higher chance of inducing some change, that's really what its triggered in my mind.

But its so funny, yesterday he called and was way calmer and is finding me other work for his second company and seems to not want to lose me. Seems fine waiting 60 days etc... this is what I mean by volatile and always playing an angle.

And yes he is sketchy. He is an exploiter, he preys on young people because they have ideas and will slave away for him. He is just a dinosaur, and I certainly don't think he was even the T-Rex back in the day.

So yes ultimately in this 60 day window I need to find a way to negotiate my shares and a guarantee out of him, at the very least. But do you think pushing for a raise to accelerate our bankruptcy and make him more annoyed to just walk away is a good idea?

In any case I think you are right that wrestling the patent from him and trying for "justice" is very messy and a long shot.
 
@stevirusky I mean you can bring up raise talk, I don't even know where you are currently or your cash situation, etc... I would be more concerned with equity shares than that, you've essentially already put in the sweat so the raise at this point seems to pale in comparison. Ofc, it would be nice.

I don't think you want to bankrupt a company on the cusp of a deal, it just sounds like a terrible idea, consumers will loose confidence. I don't even think that is viable in all honesty. I think your fate is tied with his at the moment, for better or worse, but I do believe there are some functiokns he performs that he probably isn't getting credit for here as well, that's just a guess I'll grant you. But unless you have negotiated licensing deals, etc. You will probably need him moving forward, or somebody like him.

I do believe it is totally fair to get any equity/revenue split ironed out, that simply makes sense. Just be clear that it has to happen, and stand your ground. Understand that the situation has been in flux from this company's inception, for better or worse, but in order to move your career forward this needs to happen. It would be best if you had some job offers to negotiate with, that type of thing.
 
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